Charles Arlinghaus: Understanding NH's gas tax politics

New Hampshire's gas tax and highway fund are little understood even as the Legislature votes today on doubling the gas tax. The state's highways are paid for with user fees and only with user fees. Revenues are stagnant even if costs aren't, and the Department of Transportation is one of the more efficient branches of government. But many gimmicks still surround highway funds and the diversion of resources.

The New Hampshire Constitution dedicates all taxes and fees associated with roads and motor vehicles specifically to construction, maintenance, and supervision of traffic on highways (think State Police). But from time immemorial legislators have seen fit to divert some of what seemed like a flush pot of money to other uses.

Roads at the state level are funded by two main buckets: 1. The turnpike fund, which receives toll revenue; and 2. Everything else, lumped into the highway fund.

The turnpike fund is paid for only with tolls. It is flush with money. The highway fund's major revenue source is the gas tax. That fund is struggling to keep up, especially as those funds are diverted to other sources.

In New Hampshire, all highway spending of any sort is paid for with user fees: gas taxes, tolls, motor vehicle registration fees and a few smaller fees. These fees support all state spending and a large grant to municipalities for local roads. In addition, almost a third of these revenues are sent to other departments, largely to pay for state troopers.

The gas tax was set at 18 cents per gallon in 1991. Revenues don't rise with inflation or gas prices. They actually fall as we get better gas mileage in our vehicles. Between 2002 and 2012, inflation was 27.6 percent, but gas tax receipts rose by only 1 percent. Motor vehicle fees, a minority share of road money, kept up with inflation.

This has placed both good pressure and bad pressure on lawmakers and administrators. The gap between 1 percent growth in the gas tax and 27 percent inflation led to the Great Highway Robbery of 2009. To try to get at some of the turnpike money (flush from toll increases), then-Gov. John Lynch concocted the scheme of selling a $1.6 mile stretch of I-95 to ourselves. It was moved from the highway fund to the turnpike fund. For the privilege of maintaining it, the turnpike agreed to transfer $120 million to the highway fund, supposedly over 20 years. Payment for the first two years was $50 million.

This seemed like a great trick, so the Legislature of a different party repeated it in 2011, "escalating the payment" to another $52 million in 2012 and 2013. The current governor plans on repeating the trick, but the loan is almost paid off so there's only $29 million left. So the "loan" will be paid in six years instead of the 20 advertised. And that's the problem with gimmicks. This one worked for 2.5 budgets, and now there's a hole.

The good pressure is the pressure to be efficient. Over the last 20 years, most departments saw a big increase in the number of employees, then a drop in the latest recession. The total number of state full-time positions is the about the same in 2012 as it was in 1994. But while the rest of state government increased by 2.5 percent, the number of positions at Transportation declined by 16 percent (1,959 to 1,650).

Lawmakers need to recognize they are out of gimmicks to shore up the fund. There is a not another $50 million biennial windfall waiting for them. But as a starting point, they can follow the laws they've already passed.

Few dispute that some gas tax money can and should be spent on state troopers. But the 2008 law that requires a minimum percentage of the tax (73 percent in the coming budget) to be spent on repairs is reasonable. Even when the last Legislature allowed extra money to be spent on troopers, it nonetheless kept the provision requiring that a minimum percentage be spent at the department of transportation.

A four-cent increase in the gas tax would raise about $27 million each year. Fifteen cents would raise about $100 million per year (current gas tax receipts are $123 million). Merely following the current law to make sure the existing user fees are spent as advertised would add $28 million over two years before charging anyone anything more.

There is a legitimate debate to be had about whether the current highway fund sources can pay for the highway system we already have. That debate, however, will be difficult if we can't trust the Legislature to start by following the laws they pass.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.